The price of a $30,000 car could drop by several hundred dollars after the HST. (Associated Press)

A $30,000 car could be hundreds of dollars cheaper in Ontario and B.C. once a single, harmonized sales tax replaces separate federal and provincial sales taxes, car dealers say.

The HST, which goes into effect in the two provinces on July 1, 2010, will cut costs to businesses such as car dealers and manufacturers, said Michael Hatch, an economist for the Canadian Automobile Dealers Association Friday.

"The car industry is intensely competitive," Hatch said at a news conference on Parliament Hill in Ottawa. "This means that when businesses save money, those savings are passed on to consumers."

The HST has been controversial because it will be applied to many items that are currently exempt from provincial sales taxes, such as gasoline, home heating fuel, taxi fares and lawyers' fees.

Nevertheless, Ontario's and B.C.'s decision to move forward with the merged tax was applauded by Hatch's group, which represents 3,500 car dealers across the country.

Under the current system, car dealers can get tax credits for the federal GST, but not the provincial sales tax (PST) on some costs related to their businesses. Similarly, manufacturers must also pay PST on some costs during the production process.

"The PST is paid by these businesses throughout this process many many times, but they're unable to claim tax credits for it, which means that it's actually … buried in sticker price several times over," Hatch said.

The HST will allow the provincial sales tax to be paid just once, at the point of sale, he added.

He predicted that could lead to savings of hundreds of dollars during the production of a $30,000 car.

He said implementation of the HST in Atlantic Canada led to lower prices for cars and trucks in the region over the next few years.

In Ontario goods purchased for resale, production machinery and equipment purchased for the use of a qualifying manufacturer are currently exempt from the provincial retail sales tax.